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CF backs ideas of rise in US corn sowings in 2016

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Fertilizer group CF Industries backed expectations for a rebound in US corn sowings in 2016 for the first time in four years, saying this would support raised nitrogen usage.

Illinois-based CF Industries pegged US corn plantings next year at about 90.5m acres, a rise of 2.1m acres year on year, and above the 90.0m acres that the US Department of Agriculture forecasts in long-term estimates.

The estimate is, however, below the 90.8m acres forecast by consultancy Informa Economics.

CF said that the rise in sowings, which would be the first since 2012, was backed by economic incentives, estimating that "current returns of the 2016 crop, based on new crop futures, favour corn plantings".

The ratio of December 2016 corn futures to the November 2016 soybean contract, a much-watched indicator of which crop will win out in farmers' spring sowings programmes, stood at 2.19 on Thursday.

A ratio at this level would be broadly considered as supportive to corn sowings, compared with a ratio which topped 2.5 ahead of this year's sowing programme, firmly incentivising soybean plantings.

'Weak agricultural demand'

CF said that the rise in sowings of corn, a nutrient-hungry crop, would boost orders of nitrogen nutrient.

"In North America, nitrogen fertilizer demand is expected to be approximately 1.2% higher in 2016 than in 2015," the group said.

The comments followed a July-to-September quarter for which the group unveiled a drop in underlying sales - with a headline figure of an increase of $6.0m to $927.4m including an $84m boost from the purchase of complete control of UK-based producer GrowHow.

The group acknowledged, for ammonium nitrate, "lower North American sales volume and average selling prices as a result of weak domestic agricultural demand".

However, CF also flagged a loss of nearly 200,000 tonnes in nitrogen production thanks to the refurbishment of its Woodward plant in Oklahoma.

China decline

The group also highlighted a boost of some $10-15 a tonne, in terms of production costs, to the competitiveness of China's much-watched urea exports thanks to yuan depreciation and a drop in coal prices, a key raw material for the country's producers.

(CF, like other North American producers, uses gas as its energy source.)

Nonetheless, against a backdrop of falling prices, Chinese urea exports will end this year at some 12m tonnes, compared with 13.6m tonnes in 2014.

"Chinese supply remains steady, but recently lower prices have reduced export volumes.

"This decline has also been evidenced in the last three India urea tenders which saw lower Chinese producer participation," CF said, flagging talk of "curtailments at several Chinese factories".

Short of forecasts

CF sold its urea at $317 a tonne in the latest quarter, a drop of 11.5% year on year, fostering a drop of 51% to $38.9m in divisional profits.

Group earnings fell by 31% to $90.9m, equivalent to $0.39 per share, short of Wall Street forecasts of a $0.73-per-share result.

CF Industries shares plunged in New York, standing 9.6% lower at $46.77 in midday deals, wiping more than $1bn from the group#s stockmarket value.

looked set for a weak opening in New York, standing 9.2% lower at $47.00 in before-the-bell trading.


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